Wednesday, July 9, 1930: Dow 219.08 +0.75 (0.3%)

Assorted historical stuff:

[A brief note: The next item is one of my favorites. A common observation by people who like the blog is that lots of it could have been written today. Well, here's a review in the 1930 Journal ... of an 1830 book ... about events in 1720 ... and it still could have been written today!]

Washington Irving's book “The Great Mississipi Bubble” republished by Random House. "The story was written about a hundred years ago and the actual event occurred more than two hundred years ago, but the narrative ... will interest many who witnessed the recent debacle of stock prices." A couple of quotes from the book: The boom - "Every now and then the world is visited by one of those delusive seasons when the 'credit system,' as it is called, expands to full luxuriance; the broad way to certain and sudden wealth lies plain and open ... "; The bust - "a panic succeeds, and the whole superstructure built upon credit and reared by speculation crumbles to the ground, leaving scarce a wreck behind."

Public opinion now appears less keen on antitrust enforcement. Government used to get very upset about "Gary dinners" where steel industry met to allegedly fix prices, but steel industry survived depressions better then - no drastic price or wage cuts were necessary. Cooperation may be necessary to ensure prosperity.

After four years of relative labor peace, coal miners and mine operators are at odds on a new labor agreement. Main issue is maintaining employment as amount of coal sold shrinks. Mine workers union leader [John L.] Lewis says "he believes in cooperation, but not as a one-way street."

Iceland engineering program plans to heat entire city of Reykjavík using hot water from underground volcanic springs.

Pennsylvania Rail. begins experimental car transport service. Passenger must buy three tickets on which to check the car, plus an excess baggage charge of $45.

Pan American Airways carries 29,805 passengers in the year ended July 1; no accidents reported.

Market commentary:

Day's market action suggests bad news has been discounted. Expected slump in steel output was reported, and bears launched repeated drives on major stocks in the morning. However, volume dried up on declines. Stocks turned up in afternoon on higher volume, helped by stronger commodities and rise in rail freight rates.

Treasury Secretary Mellon is putting his money where his mouth is - his companies have announced new construction plans involving nine figure expenditures. Gulf oil alone is spending over $50M for new pipelines and refineries.

Professional bears seen continuing their activities; some observers recommend waiting for the market "to indicate its next important move."

R.H. Bean, exec. secretary American Acceptance Council, criticizes earlier complacency, but now optimistic: "The worst of the storm is undoubtedly behind us, and the casualty list is amazingly small for such a violent disturbance in industry and finance."

Some observers believe stocks are currently good long term buys although an absolute bottom may not have been reached. Cite a signal that has been very reliable for the past 30 years - stock yields going higher than rates on commercial paper. All 8 cases of this signal for the past 30 years have been good buy points, though in 5 of the cases of market declined a little more (average 7%). Average advance from the buy signal was 42%.

Editorial - British manifesto calling for a tariff wall around the Empire is a wakeup call, since half US exports go to countries within it.Time for President to use flexible provision of tariff to fix problems before British and European unhappiness leads to concrete action.

Economic news and individual company reports:

US freight loadings for week ended June 28 were 936, 848 cars, up 15,989 over previous week but down 159,721 from 1929.

New York leads all states with merchandise exports of $955M for 1929.

Building plans filed in New York for June totaled $34.8M down 6% from 1929.

American Cigar expects 1930 earnings lower due to heavy promotional effort to establish the new Cremo cigar as one of the leading 5-cent brands.

Great stock market-related rhyme:

“In stocks of wood no longer should one bear incarceration, but hand and foot are many put 'in stocks' for long duration.

At each 'new low' as the markets go locked up in stocks securely - for a long time yet some folks will sweat bound hand and foot most surely. - Gordon Price”

+ The Boring Stuff:

Wheat corn, and cotton down in morning trading but rallied sharply, closing with good gains. Other commodities steady to slightly lower. Investment bonds higher, advance to record prices for the year. Foreign currency steady at high levels.

Drop in brokers loans from last October's peak of $6.8B to current $3.2B is more remarkable considering over $10B of new securities have been listed on the New York Stock Exchange in the past 10 months.

Drop in brokers loans may be overstating liquidation since loans by banks based on securities have been rising. Over the past month, total loans on securities have only gone down by $462M, compared to brokers' loans reported decline of $803M. May still be seen as indication that stocks are passing from weak to strong hands assuming that stock buyers who use bank credit are more conservative than brokers' margin customers.

Auto industry is now essential to many others including steel, oil, rubber etc. Current output has fallen off but still is better than past years except for the record 1929. Should rapidly recover when the current depression is over.

Steel ingot production down to 48% of capacity from 64% previous week, due to curtailment over July 4 holiday.

Machine tool market demand reported "almost negligible".

Consol. Gas & Elec. of Baltimore earnings for year ended May 31 were $6.22/share vs. $5.83/share in 1929. American Water Works & Electric earnings per year ended May 31 $3.84/share vs. $3.92 in 1929.

Vacuum Oil reports sales and earnings for first four months of year at record level. California Union Oil first half sales $44.5M, up $1.5M from 1929; net income $1.20/share vs. $1.72 in 1929.

Burroughs Adding Machine first half sales about 10% below 1929, earnings expected somewhat below 1929. Underwood first half net about $3.50/share vs. $4.57 in 1929. NCR first half earnings about $1.19/share vs. $2.77 in 1929.

Woolworth June sales $20.7M, down 12.2% from 1929; 6 month sales $131.3M, down 3.3%. Kress June sales $5.2M, up 6.9% over 1929; 6M sales $30.3M, up 5.4%. J.C. Penney June sales $15.8M, down 7.4% from 1929; 6M sales $86.5M, up 4.1%.

General Mills expects earnings for year ended May 31 better than the $4.57/share in previous year. Milling industry has been able to use grain exchanges to hedge against fluctuations in grain prices.

Canada Dry reports June sales higher than 1929.

Melville Shoe reports first-half sales up 1.5% over 1929.

Borg-Warner (car components) operating income for first quarter $1.7M vs. $2.2M in 1929.